More than two-thirds of Adidas’s stores are closed due to the COVID-19 pandemic, which led the company to forecast an unprofitable quarter in the three months through June.

(Bloomberg)—Adidas AG CEO Kasper Rorsted tried to present a silver lining as he predicted the German shoemaker’s first quarterly loss in four years: that cooped-up consumers might need more sportswear once countries lift stay-at-home orders.

More than two-thirds of Adidas’s stores are closed due to the COVID-19 pandemic, which led the company to forecast an unprofitable quarter in the three months through June. Sales will probably drop about 40%, adjusted for currency swings. The stock, which has lost almost a third of its value this year, rose as much as 5.4% Monday on optimism there’s still life in sporting goods.

“People that have been locked into apartments or houses for four, six, eight or ten weeks, as has been the case in many places in the world, really want to go out and move and exercise and walk or run,” Rorsted said in an interview with Bloomberg Television.

Consumer goods companies are banking on products with the most resilient demand to help offset growing piles of unsold inventory. Nestle SA last week reported strong demand for convenience meals even as consumers pulled back on impulse buys of ice cream and bottled water.

Adidas’s inventory rose by 32% in the first quarter as the company took back unsold products from stores in China and retailers canceled orders. Profit slumped 97% in the period.

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Helping damp the slump in sales are China and South Korea, where stores have reopened, and online shopping. Sales have gradually improved in greater China in the first three weeks of the quarter, and global online growth is accelerating from a 55% increase in March. Rorsted said Adidas may beat this year’s 4 billion-euro ($4.3 billion) target for ecommerce revenue.

Still, online sales can’t make up for the store closures in Europe, North and South America, Russia and other parts of Asia, which have already cut 1 billion euros off revenue so far this month.

Adidas aims to pay back its state-backed loan as quickly as possible, Rorsted also said, declining to comment on whether there’s any talks with banks. Adidas burned 1.4 billion euros in cash in the first quarter and expects to use up more this quarter. Still, the company is well-equipped to handle this year, Rorsted said. Adidas said it will try to avoid layoffs, though doesn’t exclude them.

Adidas is No. 19 in the Digital Commerce 360 Europe 500.
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